Reif Cohen High on Cablevision

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Influential Merrill Lynch media analyst Jessica Reif Cohen reinitiated coverage of Cablevision Systems with a “buy” rating Tuesday and a $41-per-share price target, adding that although she does not expect a new bid to take the company private from its ruling Dolan family, she believes improving fundamentals will continue to drive the stock.

Reif Cohen’s report is in sharp contrast to Citigroup analyst Jason Bazinet, who lowered his rating on Cablevision to “sell” Monday, citing concerns about increased competition from Verizon Communications’ FiOS video, voice and high-speed-Internet offering. Cablevision stock dipped 1.5% Monday (51 cents per share) to $30.15 each in the wake of Bazinet’s report.

Reif Cohen took a decidedly optimistic stance, noting that Cablevision has the premiere cluster in the United States -- the New York metropolitan area -- and while it could see a decline in basic-subscriber growth as FiOS is rolled out to more areas inside the cable company’s footprint, the impact should not be significant.

In her report, Reif Cohen wrote that even if Cablevision’s 3% annual basic-subscriber growth dipped to 1.8%, it would still be tops in the industry. Adding to her optimism: Cablevision has the highest digital-video and high-speed-Internet penetration in the industry, its annual cash flow per subscriber of $512 is 15% higher than Comcast’s and it stands to reap substantial rewards from business-telephone service.

Reif Cohen estimated that the business market represents a $5.8 billion annual revenue opportunity within Cablevision’s footprint, with small- and medium-enterprise (SME) businesses making up about $3.5 billion of that total.

With a 2,400-mile fiber network already in place -- making the cost of entry into business telephony minimal -- and long-standing large-enterprise telephone unit Lightpath recently connecting its 2,000th building with fiber service, Reif Cohen believes Cablevision “will be the most successful cable operator in the SME space.”

She was also encouraged by Cablevision’s special transaction committee’s rejection of the Dolan family’s $30-per-share offer to take the company private last week, adding in her report that it may “indicate that the board is more willing to assert itself when it believes the actions of the Dolan family are at odds with public shareholders.”

Cablevision shares were up 13 cents to $30.28 each in afternoon trading Tuesday.

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